06th November 2023 – 11th November 2023 | Another week in the markets
This week, diabetes drug Mounjaro gets FDA approval for use as an anti-obesity drug, General Motors Co. recalls 950 robotaxis after another pedestrian accident, and WeWork files for bankruptcy.
- Eli Lilly gets an FDA nod to sell Mounjaro, its Type 2 diabetes treatment drug, as a wider-use drug for anti-obesity under the name Zepbound.
- Once a favourite of blue-chip investors, WeWork files for bankruptcy because of high debt and low demand. Lenders agree to support a restructuring deal, US bankruptcy code to provide additional relief.
- GM’s Cruise recalls 950 of its self-driving robotaxis across the US, following a crash involving a pedestrian.
- To fortify its electric vehicle arm, Ashok Leyland plans to invest ₹1,200 cr. in Switch Mobility, its EV subsidiary.
- The EV unicorn, Ola Electric, reshapes board and financial leadership ahead of its IPO filing this month.
Taking stock | Worth the ‘weight’ | Won’tWork | Cruise uncontrol | EVergreen | Ola, IPO 👋 | Invest wisely
This week, as the Q3 corporate earnings releases came to a close, the technology-oriented firms provided support to the growth indices. Unexpectedly, the US Treasury debt auctions during the week drove the equity and bond markets sentiment. Despite the rupee falling to its lifetime low of 83.33 against the US dollar, BSE Sensex and NSE Nifty closed at a high for the second consecutive week. Energy stocks rose as oil prices fell. Though marginally, the major indices gained, for the second consecutive week — the S&P 500 gained 1.31%, the Dow gained 0.65%, and the Nasdaq led the way and gained 2.37%.
Worth the weight
Eli Lilly received much-needed US FDA approval to rebrand their blockbuster diabetes drug Mounjaro as Zepbound, a chronic weight management drug.
The approval comes as a challenge to the dominance of Novo Nordisk in the weight loss drug market. Eli Lilly has stated that Zepbound will be priced at $1,059.87, approximately 20% less than Novo’s WeGovy.
Lilly’s Mounjaro rapidly became its top-selling product as a diabetes drug, resulting in $1.41bn. in revenue from its sales in Q3 itself. The treatment’s long-term potential and wider use have made Eli Lilly the most valuable pharmaceutical company in the world, with a market capitalisation of nearly $600bn.
The impact of the rising popularity of weight loss drugs, however, has been felt by the fast food industry, and this has reflected in the investor behaviour as well. Short interest in restaurant stocks such as Chipotle Mexican Grill, McDonald’s, and Starbucks have significantly expanded to $12.2 billion. The S&P 500 Restaurant Sub Industry Index dropped approximately 12% in the past three months.
Amidst reducing demand for office space, WeWork sought US bankruptcy protection earlier this week after it failed to make good its losses and repay its debt.
Once worth $47 billion, the co-working space giant finds it hard to make ends meet today. While the US bankruptcy code will help WeWork rid itself of onerous leases, about 92% of the company’s lenders have agreed to support a restructuring agreement by converting their secured debt into equity. This agreement is estimated to help the company wipe off its debt worth $3bn.
Source: Value Research
General Motors subsidiary Cruise recalled its driverless cars after a software fault led to a crash involving a pedestrian. The car lost control and dragged a woman several feet on the street.
Following the crash, the revocation of its permit in California, and persistent losses on Cruise since 2017, the company has paused all its driverless operations across the US. Cruise has also already laid off some of its robotaxi contractors and is planning to cut off some of its full-time staff as well.
However, despite layoffs, recalls, and an overall tough year, the company has clutched to its 2026 EV prospects wherein it aims to capture 14% of the US EV market. Additionally, it has also made moves to reduce its reliance on China for sourcing electric motor magnets.
Ashok Leyland has announced its plans to foray into electric buses and light commercial vehicles by investing ₹1,200 cr. in its EV arm – Switch Mobility.
The board of directors approved the investment as equity through its holding company Optare PLC UK this week. The fund allocation will propel the expansion of product offerings, R&D, and operational enhancements across the UK and India.
Switch India has successfully garnered orders from state transport undertakings, launched India’s only Double Decker e-Bus last year, and introduced its state-of-the-art e-LCVs this year.
The rapid growth of the EV sector and increasing government support may manifest as the basis for the Company’s expansion in the EV market.
Ola Electric has announced its plans to go public by the end of this fiscal. Given that SEBI generally takes three to four months to approve an IPO, Ola has announced its plans to file its draft red herring prospectus by the end of this month.
However, with the 2024 general elections nearly overlapping with the expected date of Ola going public, the IPO may be delayed to May-June 2024.
In the interim, the management has set on a task to make significant organisational changes, especially in the finance department, and to reconstitute its board, ahead of its preparation for a public listing.
Ola Electric has demonstrated an impressive sales figure with its ~35% market share in the highly competitive electric two-wheeler market. Furthermore, ahead of its IPO, it is also working on launching two low-powered scooter variants in addition to its existing models.
While both domestic and global markets maintained their high, the upcoming week has much to look forward to. The closing of the US stocks at a low, a disappointing Treasury debt auction, reignition of the Fed’s scare against the interest rate hikes, and the consumer price index inflation data and retail sales, to name a few. While the coming week in the markets remains crucial for investors, add international exposure to your portfolio and invest in American markets – download the Appreciate app now.
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